High street fashion chain Ted Baker lost as much as a fifth of its market value on Tuesday morning after Authentic Brands, the preferred bidder for the company, pulled out of the process.
The company has been in play since March, when US private equity group Sycamore Capital Partners acknowledged it was considering making an offer.
Ted Baker launched a formal auction process at the start of April and although it has not publicly named the participants, it has not denied reports that Authentic was the preferred bidder.
The privately owned US brand aggregator, which owns Reebok, Nautica and Eddie Bauer among others, declined to comment.
With more than $21bn of annual revenue and backing from large private equity groups such as CVC, Authentic would have had the financial capacity to acquire Ted Baker.
In an update on Tuesday, Ted Baker stressed that the withdrawal was not connected to the due diligence process, but did not offer any further explanation.
The group has in the past reported accounting errors that resulted in an overstatement of inventories.
The retailer will now consider other offers it received in late May and “determine whether to proceed with any of those proposals” but cautioned there was “no certainty that an offer will be made”.
Shares in Ted Baker fell as much as 22 per cent in early trading, and were 16 per cent lower at 113p by midday.
Under Rachel Osborne, the former Debenhams finance director who was appointed chief executive in 2020, Ted Baker has strengthened its balance sheet by raising equity, selling its London headquarters building and cutting costs.
At its full-year results in May, it said it had “done much of the heavy lifting needed to move the business forward” but the group still made a £44mn pre-tax loss as the pandemic disrupted its recovery plans.
In March, Sycamore said it was considering an offer for the UK company, but Ted Baker’s board rebuffed the bid because it said its shares were worth more than the 137p a share the New York investment group was willing to pay.
Ted Baker’s largest shareholder is special situations investor Toscafund, which has past form at taking companies private but is not believed to be a participant in the current process. It owns 28.8 per cent of the company.
Ray Kelvin, the founder, owns about 11 per cent. He resigned as chief executive after allegations of inappropriate behaviour to subordinates, although he has always denied any improper conduct.
He has an arm’s-length advisory agreement with the current board and the right to nominate a non-executive director, but is not involved in the day-to-day running of the company.